Sdiptech AB (publ)

Thank you and welcome to this presentation of StipTech's report from the first quarter of 2025. Myself Ben Kleistrom and my colleague Susanna will guide you through the different performances of the group and as always we will start with a short presentation of what StipTech is. As most of you know already we are a technology group where our business units, they provide products and solutions for creating a more sustainable, efficient, and safe society. Very much of those solutions are built into infrastructures. That's also why we call ourselves an infrastructure technology group. Since the beginning of this year, we have divided ourselves into four business areas, and we will get back to that. those in more detail that's consisting currently then of the supply chain and transportation the energy electrification water and bioeconomy and safety and security and what's common for all our business units within these business areas are some key drivers and we're looking to acquire companies within these areas that all have some underlying long-term growth drivers very much based on that we have an aging infrastructure within at least Europe and many other parts of the world. We have an increase in consumption of infrastructure. We have seen increasing regulations around infrastructure. And not the least, we all strive for a more sustainable, efficient and safe society. So we think that we are well positioned for a good demand and stable growth over time. As you can see from the map to the right, that's where our companies are today and with our main offices. We also have subsidiaries, sub-subsidiaries in other geographies around the world. Currently 41 business units and we have had since the listing of our B share a 34% CAGR when it comes to our EBITDA profit. Apart from financial metrics and KPIs, we also have a goal of reducing our CO2 footprint from our internal operations. And that's measured as a CO2 per turnover in millions, that's with 24%. First since 2021 then during the first three years and our ambition and target is to reduce by 50% until 2026. So we're well on the track on that. So let's have a look at the first quarter then and some highlights. We think it was a quite decent report and outcome. We saw net sales increasing all in all with some 4%. However, organic, that was a minus of 4%. And to some extent, that's depending on that towards the end of the period, we saw some that our customers become a little bit cautious and perhaps waiting or postponing decisions for some investment decisions. But all in all, it was not a huge impact for Q1. Let's come back to what we see for current quarter and onwards. When it came to our EBITDA, that was flat more or less compared to last year, including acquisitions, meaning that we had a negative organic growth. some effects from that being still that we had some the organic sales were negative but also that we saw some cost increases in staff cost and also that we had in some units very tough comparisons and not the least in the business area water and bioeconomy and we will come back to that as well Our margin then obviously decreased a bit and we're of course not satisfied with that. So we're already taking different actions to have more cost efficient operations. So cost cutting more efficient operations in many different ways. We'll come back to that as well a little bit. The cash flow was stable and solid for the quarter and it was in line with last year. And we were happy to welcome three more companies into the group, sorry, two more companies into the group, phase three in UK, which we presented already last quarter, and then a very small add-on acquisition to our Dutch company, Sartus, namely a company called Supply in the Netherlands. Both of them very well positioned and contributing very well to the group already so let's have a look on the sales all in all as i mentioned we had an increase in total with four percent but a decline organically um the macro and geopolitical situation gave some impacts towards the end of the quarter When it comes to direct exposure to the US, it's very limited for us. It's roughly 4% of our sales is to customers based in the US. So that hasn't had a big impact yet when it comes to trade tariffs, etc. But we're having close dialogue with our units over there to see how we can mitigate that and for example, then putting more production and manufacturing for some of our products locally in the US to avoid as much as possible effects from tariffs. Trade flows going from Asia into the US, except for very small units from, for example, Taiwan, but not from China directly. So we're not hit by these very high tariffs anyhow. And when it comes to the EBITDA, As I mentioned, we're focusing them on different initiatives to increase profitability, to make sure that we adjust and adapt to the different situations. A main driver for increased costs have been staff costs, personnel costs, not the least in the UK, where almost half of our turnover is coming from. where we have seen increase both from a legal perspective in minimum wages coming along there from this quarter, but also from overall inflation on the Cirelli levels, for example. But we think at least we can adjust for that as well through increasing prices, not the least, but it takes some time for us to do that, to bring these cost increases over to our customers. mainly because we have long-term agreements with customers stipulating how much our products and services cost but as soon as we can we of course adjust. We had similar situation a couple of years ago on the inflation of the cost of goods increased and we said already then that six to nine months lag between cost increase and price increase for us typically and we're working of course to shorten that time lag so we can adjust prices as soon as we can and of course in all new deals we adjust for increased costs when it comes to the kegger on sales since the stock since the listing of the b share it has been 24 and you see on the graph on the right the development and you also see the organic growth on a last 12 month basis so um right now then for last 12 months q1 was zero percent last year ending with three percent organic growth then looking at the geographical split in more detail on the right hand side As I mentioned, we had almost half, 45% of our turnover is from customers in the UK. Our business units in UK, of course, also have exports. So the units in UK, they actually represent more or less half of all our turnover. As you see there, the US, 4%. Sweden is decreasing since we haven't made really any major acquisitions in a very long time. So it's down to below 17%. And then you see a split on some major geographies like Norway and Italy and other Europe and rest of the world. All in all, that section is increasing bit by bit since we are acquiring product based companies that have some exports. On the left-hand side, you see the split on the turnover by type of revenue. We're slowly increasing the share of product-based sales since we have both more or less divested or closing down businesses within service and installation, but we still like service and installation as long as it's on our own products. So we will always have some revenue streams for that, but it has decreased a little bit over the years. But I think this distribution of the turnover is pretty stable over time. Looking on the adjusted EBITDA corresponding development, you see on the graph there how it has developed, has been a 34% CAGR since 2017. It has slowed down a bit the last, year, year and a half. And also here you see the organic last 12 month figures in these circles. So last year it was a negative 2% and now on the last 12 month basis is a negative 7%. And as I mentioned, we're of course not happy or satisfied with that and do our best to get that back on track. All in all the EBITDA as mentioned was on the similar level as last year, the 251 million. in adjusted EBITDA. And to counterbalance the organic decrease, we had our acquired companies since last year contributing in a positive and very good way. We'll come back to that a little bit. And I will discuss the different business areas here in the coming slides. So wait to present that. And when it then comes to our business areas, as you may know them, that we have a new organization since the beginning of this year, the four business areas I mentioned. And here on this slide, you see the heads of the respective business area and also the distribution of sales and EBITDA. And as you can see, our biggest business area both from profits and sales is the supply chain and transportation and then the second biggest energy and electrification and then we have water by economy and safety and security is the smallest one but with the highest margin actually so We think it's about roughly the same number of business units within each business area. That's how we are organized, that the business area managers, they can have around seven, eight or so business units each to care for and take care of. So it's important then to have a good distribution of the responsibilities through the different business areas. If we then look at the performance on each of these, and start with supply chain and transportation we saw a slight decrease on the sales but a smaller increase of a beta meaning that the margin increased a bit we saw for a few companies especially the ones with solutions for logistics Could be in logistics centers, warehouses or container terminals that their customers postponed orders, waiting of executing some of their orders now towards the end of the period. But the underlying demand is stable. So some of the units in this business area had a very good sales development in the quarter. So all in all, very stable. And as you can see on the graph, the EBITDA margin two years have been stable between the 17 and 20 percent. Looking into the energy and electrification here, we saw increased sales and increased profits. of its increased more than sales. So we had a strengthening of the margin. And here we also had an acquisition contributing to the development that we did in the quarter phase three. And so many other of the units were performing very well, not to list the one with the electrification and energy efficiency, for example, our Our EV charging business in the UK, Rolex, performed very good and some other units within the energy efficiency sector. However, we have one unit which is a little bit relying on the climate providing services for construction of infrastructure during winter time that kind of throws up the ground and we can be heating different areas. They saw a mild winter making their demand a little bit less than usual, but still quite decent, but not as high as last year. So there were some ups and downs, but also here you see a stable margin over time and we think there are many good possibility for the companies in this business area to develop well then coming to water and bioeconomy here we saw the biggest drop in profitability the sales were more or less on the same level thanks to acquisitions from last year then contributing but we saw that some units had a challenging quarter with tough comparable numbers from last year. And we also here have some companies with quite a few employees and big number of staff, and they were then hit by the increased staff costs in the UK. As you may know, it's from 1st of April, the minimum wages increase also this year as it did last year. but this year it has had a greater impact on their overall staff costs. And those staff costs has increased already from the beginning of the year. So all in all for the whole group, the staff cost increased with 5%, which more or less correlates to our negative profit growth in numbers. um again of course we do our best to compensate for that through increased prices and also do some other activities and measures and perhaps should be noted also that last year q1 in 24 as you can see from the chart here on the right hand side the beta margin was extremely high 29 that's not a normal figure So we're now back at more normal levels on the EBITDA margin for this business area. And last but not least, safety and security. We had an increase in sales and also an increase in EBITDA. acquired companies from q4 last year contributing and we see overall a continued focus on safety which leads to good demand more or less across the business area and that the beta margin is a little bit lower than year ago uh it's more the mix of sales from these companies since we have made as i said acquisitions into this business area that makes also typically that they need a little margin changes over time can go up or down depending on the beta margin of the companies acquired so all in all very stable development for this business area So with that said, I would like to hand over to my colleague Susanna to mention a few words about different KPIs, financial KPIs.

Yes. Thank you Bengt. Then starting to look a bit at the cash flow and cash conversion. In the quarter, we had a cash flow from operations landing at 170 million and in the quarter, the cash conversion was at 74%. If we look at the rolling 12 months, cash flow from operations was at 822. So similar to previous quarter. And we had a cash conversion of 83%. So we're well within the range of 70 to 90% that we have as a sort of internal guideline. and any variance between the quarter is really relating to timing. Moving to the next slide and looking at some additional metrics. Firstly, we have the profit after tax. In the quarter, it was 74 million, so somewhat lower than the 110 million that we had the same quarter last year. We had a financial net of minus 91 million this quarter, which was quite a lot higher than the same quarter last year. It was 59 million then. The primary impact for this increase was unrealized foreign exchange losses of minus 25 million in this quarter and it was plus three same quarter last year so a variance of 28 million and that relates to the balance sheet and in the quarter both the pound as well as the euro has been decreasing with some six percent so that has given the impact we also have a somewhat higher interest cost in the last year because of higher debt levels, even though interest rates have been coming down. And both these effects also, of course, impact the earnings per share. And then moving to the debt leverage ratios. You can see those numbers here, but they are stable versus previous quarter. So we're pretty much in line with previous quarter. If you compare them with the same quarter last year, the variance is depending on acquisition pace and the payouts of contingent considerations. And then moving on to return on capital employed. And this was in line with last quarter, but slightly down versus the same quarter last year, now at 12.5% versus 13.2% last year. And here it's primarily the acquisitions in Q4 and Q1 that has impacted as we do not yet account for the full year profits for those acquisitions. If you look at return on capital employed for the underlying businesses, the average for those it's 56%. And of course, there is difference looking at businesses versus the group But over time with new acquisitions, organic growth and also higher cash flows, return on capital employed for the group will gradually increase. And with that, I'm handing back over to Beng to talk about acquisitions.

Thank you, Susanna. And yeah, as mentioned, we did one acquisition a bigger one during the con we have a very solid pipeline as always i would say um we have some prioritized geographies we have added for the for the ones of you who have been listening to us for some some time now We have added Germany, and that's partly because we now have access to underlying data for German companies. We can analyze that better. As you know, we have our in-house M&A team here in Stockholm, and so we do all the screening and sourcing of potential targets here centrally. Of course, sometimes with input from our business units where they have ideas that could be good acquisitions, but then everything is processed centrally and analyzed. And now we're testing in Germany a little bit more in practice and have already some discussions with German-based companies. But however, all in all, it's very important that we balance the pace of acquisitions against what's happening in the external factors and the uncertainties around us. And our guidance here on the volume to acquire, which have increased in the past from 90 million to now a range 120, 150. And as you can see, it's not a hard target. We have been below that, 23 and 24. And we are very cautious, of course, now as well to make sure that positions we do have a good solid outlook even in the current circumstances and we're very careful in our due diligence. So we make acquisitions when we feel comfortable that it's a high quality company and we do it also when we take all the other factors into consideration. So for the time being a little bit careful pace of acquisitions I could say. But our financial position is good. We have a new credit arrangement in place. We have extended that with almost a billion now, so we have more than 2.2 billion Swedish in accessible funding. reduced the interest rates all in all in this credit agreement which is of course good and added also a another one of the swedish major banks into this facility so we have three credit providers in that facility so we're of course very happy with that and it's also a sign that our credit providers have a great trust in us as a company we also have our sustainability loan bond out there as well. Even though we presented the acquisition of phase three in the last quarter could just mention it again, it has performed very good. It has and had already before we acquired it relationships with one of our other companies in the UK providing solutions for temporary electricity and so IDE systems. ID systems, which had a very great performance last year, since they have the Olympic Games in Paris as a very big customer, no Olympic Games this year. So of course, they will have a lower volume, both on sales and profit this year, but anyhow, a very good company. and then these two companies together phase three and id cooperate in a lot of areas and um so really looking forward to to support phase three going onwards and they have had a very good start and then we made i don't have a slide on that but we made as i mentioned in the beginning a small acquisition of a dutch company called supply which have them ai based solutions for for optical recognition, which our Dutch company Citus is using for their products and solutions for handling container terminals and logistic centers, etc. So the expertise we acquired, you could say, helped us in the development of enhancing and improving our solutions in that area. So also welcoming the staff of supply into our group. So as a summary, some key takeaways. As you saw we have a good cash flow ticking in. We made a lot of activities on that last year and we're still careful to make sure that we continue to get good cash flow from the operations. We had good positive contributions from our acquisitions. And we saw a good development in many of our business units with strong underlying trends and drivers. But as mentioned, we had some business units saw an effect from the uncertainties around the world and had a bit softer development, not the least towards the end of the quarter. And also some of the business units had a very strong comparable figures from last year. But we have a full focus on profitability and efficiency and of course doing a lot of activities for growth as well going forward and it's difficult of course to foresee how the current situation in the overall global scene will affect us during this quarter and I think no company can really say how that will affect them but we try our best to mitigate and navigate through these uncertainties that exist based on our decentralized model of having a portfolio of very strong and well-performing companies I should add also since it was also mentioned in the report that we evaluate of course all our companies all the time and specifically we also evaluate against criteria that we have for acquiring new companies and these criteria they were you could say we changed that quite dramatically some five six years ago in the summer of 2019 from that point in time and onwards we have tougher criteria than before we're evaluating companies that currently do not meet those criteria many of the companies acquired before that still meet this criteria but we have some that perhaps don't and could perhaps have a better home somewhere else it's not that these companies are not performing good they perform good according to um in their respective business nation on what could be expected but perhaps for us it's better capital allocation to use that money to acquire other type of companies meeting our current criteria So there may be possible divestments ahead. An example of that was the divestment we did a year ago, Swedish company called Frigotek that we sold to another Swedish group called the Nordic Climate Group, which was a very good home for that type of company. And we could use those money to acquire other companies than aligned with our criteria. So with that said,